Mr. Speaker, it is almost a necessity for a member of Parliament to wade into this GST harmonization debate. This is an issue that brought many people in the House to the political process in the first place.
It seems particularly ironic that the government that ran on a pledge to abolish the GST finds itself in a position of trying to squirm out from between a rock and a hard place, finding itself inexorably smashed by the fact it had made a commitment all over the country, in every single constituency saying: "Elect us and we will get rid of the GST". The Liberal lexicon of getting rid of the GST is to try to disguise it by harmonizing it.
Because the package would not sell across the country, it was necessary for the government to then try and involve as many provinces as possible in a nefarious scheme to slide out from under its responsibility for a campaign promise clearly made across the country.
The only provinces that the federal government was able to induce to going along with its nefarious scheme were the maritime provinces, all of whom in one degree or another have consistently been recipients of largesse from the federal treasury for many years.
In fairness, I would expect that many of the premiers thought this would not be a bad deal. It is not a bad deal for the four Atlantic premiers who signed on to this nefarious scheme because the rest of the country was going to have to finance it, top it up a little bit to the tune of almost a billion dollars. That billion dollars comes from the other provinces.
Because the government is in a majority position it has the power and the authority, although it does not have the moral authority, to do pretty much as it sees fit, provided it can get the provinces to go along.
As members know, I represent a riding in Alberta. In Alberta we do not have a provincial sales tax, so harmonization to Alberta would be a particularly bitter pill to swallow. It is interesting that as of March 1996 provincial retail sales taxes varied across the country. The federal government wanted to somehow harmonize everything across the country so that everybody would have the same sales tax, thereby removing the competitive advantage of a lower tax or no tax at all from any part of the country that was able to do so.
It is interesting to note that as we go from east to west in 1996 Newfoundland had the highest retail sales tax at 12 per cent, Prince Edward Island at 10 per cent, Nova Scotia at 11 per cent and New Brunswick at 11 per cent. So a harmonized tax at 15 per cent is really a significant reduction on their tax rates but it represents a significant tax increase based on the fact that it will be applied over a much broader range of products.
As we continue from east to west we find that the tax rates come down significantly. In March 1996 Quebec was at 6.5 per cent, Ontario was at 8 per cent, Manitoba was a 7 per cent, Saskatchewan was at 9 per cent, Alberta was at zero per cent and British Columbia was at 7 per cent. That means some of the provinces raised more money, perhaps through gasoline taxes or other excise taxes or had a higher rate of surcharge on personal income taxes.
However, the province and the people of Alberta have made the conscious decision that we do not want higher retail taxes. When the idea of applying a harmonized tax to Alberta was floated recently, the University of Alberta in the Western Centre for Economic Research led by senior research analyst Karen S. Davis put together a study on what would happen in Alberta if a harmonized sales tax were applied in Alberta. The study has revealed some interesting statistics and conclusions, some of which I will read into the record. In fairness to Karen Davis and her research I am reading very selectively into the record from this report.
She makes the case, as was made early on, that if given the choice between having two very different taxes at different rates that cover different bases, that is they apply to different products differently or some not at all, obviously for the ease of everyone concerned it would make sense not to have these differences. Then the decision would be on what products should the tax be applied to, should the tax be applied broadly or narrowly, and should the tax be high or low. It makes sense that the broader the application, the lower the rate; the more narrow and focused the application, the higher the rate would be. It is plain common sense.
But even in a situation like Alberta's where we have a zero rate of provincial tax and with the commitment from the federal government that any taxes raised by this harmonized tax in Alberta would come into the federal treasury and then be refunded to Alberta, even with that undertaking, if it could be believed, try to find 10 people who would say with any degree of confidence they will give the government the opportunity to get its hands on x amount of money and expect to get it all back. I have a bridge to sell you in Brooklyn.
I would like to give credit to the research done by the University of Alberta. I would like to read into the record the financial impact a harmonized tax of 12 per cent would have in Alberta. It reads: "We conclude that harmonization at a 12 per cent rate across Canada will cause real gross domestic product in Alberta to fall by up to one-half of a per cent in the short term, and as many as 10,000 jobs would be lost. The impact on GDP is lessened if wages also fall to mitigate the effects on employment. Real wages can be expected to decline by 1 per cent to 2 per cent depending upon their flexibility".
The authors of the report have clearly stated that there are two effects, the short term effect and the long term effect. Their conclusion is also that in the long term it is possible, but not necessarily probable, that the negative effects could be mitigated over the long term. However, in the short term it is most likely there would be serious economic damage done to Alberta.
The authors also point out that there are two aspects to harmonization. This is something that is often overlooked. During the debate in the House today it was mentioned very rarely, if at all. There are two aspects to harmonization, that of the tax base and that of the tax rate. A key issue is the need to weigh the incremental benefits to Canada of a harmonized rate against the adverse short term adjustments imposed on Alberta by a sudden increase in sales taxation. Based on the premise that if we are in the boat together, the better the boat is doing, we are going to do better incrementally. Unfortunately these are theories, they are not proven in fact. The one thing that we do know is that the short term damage would be significant.
From the Alberta perspective, the finance committee's 1994 recommendations are more attractive than the finance minister's plan to move to a uniform rate. Even with the abatement of the incremental revenues collected from Alberta in its June 1994 recommendations to government, the finance committee stressed the benefits of adoption of a consistent broad base and gave suggestions on how to do it, but it was not accepted.